Regis Healthcare hits the brakes after half-year profit slump

Listed aged care provider Regis is reviewing acquisitions and pausing new developments after a 50 per cent plunge in half-year profit.

Regis Healthcare is putting the brakes on expansion following a profit slump. Picture: Patrick Gorbunovs

Listed aged care provider, Regis Healthcare, is reviewing its acquisition strategy and pausing new nursing home developments after it posted a 50 per cent plunge in half-year profit to $12.08m.

Chief executive Linda Mellors said the result reflected challenging industry conditions – with public sentiment weakened from the aged care royal commission and is accounts of abuse and neglect.

Dr Mellors said Regis was not alone with profits coming under pressure, citing the latest report from the Aged Care Financing Authority, which stated 44 per cent of providers were now operating at a deficit.

“The financial result reflects the continuing challenging industry conditions, with pressure on occupancy and ongoing insufficient funding indexation to cover the corresponding inflation in operating costs,” Dr Mellors said.

“We continue to review acquisition and development opportunities whilst keeping a conservative approach to managing our balance sheet and debt.”

Revenue firmed 4.4 per cent to $332.2m for the six months to December 31, while the company reaffirmed full year net profit guidance of $28m compared with $50.9m in 2019.

Meanwhile, Regis’ average occupancy rate is 90.4 per cent.

Shares in Regis fell more than 4 per cent following the news on Wednesday.

“The residential aged care Industry is experiencing occupancy headwinds due to continued negative public sentiment towards aged care, in part due to the aged care royal commission and associated reporting,” Dr Mellors said.

She added consumers were also delaying entry into residential care as they anticipated an increase in the number of new home care places to come onto the market.

But Dr Mellors said the new home investment pipeline had paused, including Regis’ own new development at Camberwell in Melbourne’s east.

“Investment in new homes has now slowed due to the lack of certainty in government funding and policy, as well as uncertain outcomes from the aged care royal Commission.

“Regis has paused several projects in the development program although the commencement of a greenfield development in Camberwell, Vic is planned for 2H FY20”.

It comes after a tough year for the aged-care industry, with every aspect of its operation scrutinised during more than 15 weeks of royal commission hearings.

The interim report ­delivered in early November highlighted three issues for urgent attention: more funding for high-need, in-home care; dealing with the use of chemical restraints; and getting 6000 young disabled people out of nursing homes.

Regis’ financial year to date occupancy at December 2019 was 92 per cent, with spot occupancy at December 17 just 91.5 per cent, compared with 92.4 per cent as at June 30.

In December, Regis also slashed normalised net profit guidance by 26.3 per cent cut to $28, citing the cost of responding to the aged care services royal commission as a key factor.

The half-year results come a day after rival Estia posted a 32 per cent slump in half-year profit to $14.3m, in what chief executive Ian Thorley said was “the most difficult period for the sector I have seen”.

“We hope that the next stage of reform and change, will include changes to the funding and financing structure to create a financially sustainable sector,” Mr Thorley said.

“Our disciplined management of costs has allowed us to sustain our staffing investment in our homes to ensure we continue to deliver the services and care that residents and families expect, whilst mitigating the impact to shareholders during the current period of margin compression.”

Regis will pay an interim dividend of 4.02c a share on April 9, representing 100 per cent of reported net profit.